Graham, Buffett's mentor there, learned from the most important thing is to invest in security When I take a taxi, often by some people considered themselves "skilled are bold" drivers scared scared. On one occasion, in the rain, the car's speed is 100 km per hour, I could not help but asked the driver to slow down the car: "suddenly come across a man or even a car how to do?" "Accident is always there, walking on the road may also be falling upstairs to the smashed flowerpots." This may be a number of drivers think. But I do not think so. There are many accidents in life is unavoidable. If it can be when driving accident, it could mean destruction. So, even though the road is sometimes a very spacious, I think it should still abide by the provisions of the speed signs on the drive. Buffett's investment philosophy, one of the points as well. He has said that Graham where he focused on learning from their mentor, is the investment in security. First half of 2000 was dramatic. First, Julian Robertson's "Tiger Fund" to close shocking. I believe the previous few years, many institutional investors are very envy "Tiger Fund" performance. Meanwhile, Buffett's Berkshire Hathaway in charge of the company's A shares from 1999 to March this year, down nearly half of the book value per share growth rate hit a 35-year low, only 0.5%. But in April, the U.S. stock market began to slump, NASDAQ index fell nearly 30% this month, Buffett has earned 5.7 billion dollars. In this way, he also April 29 shareholders meeting to remove trouble. As far as "The New York Times" reported that a shareholder originally wanted to use tomatoes to pound Warren Buffett. The previous day, with the "Tiger Fund" also the famous "quantum fund" have disappeared. Soros boss also announced the retirement of the fund managers. "Tiger Fund" is the failure of the so-called traditional stock investments, which had been considered the most secure. "Quantum fund" failure lies on the investment in technology stocks, after the first big win is the big loser. Obviously, if we are still persistent in the previous stage of "traditional stock" and the "new economy stocks," Who is who is worth investing in a bubble, there is no grasp the crux of the problem. In the marathon, you want to go first prerequisite is to finish the course. Buffett often use a similar metaphor to describe their investment style. "Quantum fund" and "The Tiger Fund," has made the investment market over the first stage of this marathon, but did not finish the course. Buffett Graham, especially in the early 30s the U.S. stock market crash of frustration experience, realized the stock market in all sorts of traps. In 1919, Graham was 25 years old. That year near his home in Columbus Square, erected a big neon light. First came a night in the "SAV" (Sa I), and then came a "OLD" (alder), and finally to fight them together, they formed a "SAVOLD" (Sa I alder). Graham inquire about an original Sa I alder company plans to produce a division of the patent granted to the states, and these branches will also be 11 available. Next, I alder Sa pile up the company's two subsidiaries listed on follow-up Graham looked at rising stock prices. At this time, there was news of Pennsylvania's Sa I alder will also be listed on the message, but the parent company's management announced plans to change the past - this would be the last one to be listed company and has the country outside of New York and Ohio, production and operating rights. This means that the last chance. Graham spent 60 thousand U.S. dollars purchase. Pennsylvania Sa I alder date of arrival of the stock listing requirements, but the transaction has not yet begun. Suddenly, all the Bodhisattva I alder shares down across the board. Graham has been confused, not knowing what had happened. A few months later, Sa I alder Companies in the market disappeared, it seems hardly existed. By this time, Graham is still on the Sa I auld what was no knowledge of a company. After the investigation, he had come to a sad conclusion: "Sa the only real incident I Alder, only Nazuo standing in Columbus Square, the company's name on the flashing neon lights." Is hard to imagine who later became the "Securities Analysis" father figure at a young age is so impulsive and rash. But it is the pain only so that Graham and the subsequent volatility of Buffett's investment circles and even the despicable bad vigilant and make a strong criticism of the system. China Securities Regulatory Commission concluded Mr Anthony Neoh, chief adviser Buffett's investment philosophy, it will be summarized in three basic principles: First, always bear in mind an enterprise book value, intrinsic value and the market there is a difference between the value of; second, the investment is based on the intrinsic value; and third, to invest as an owner. Mr. Leung is indeed a deep cultivation, point out the crux of Buffett's words and deeds. What is "intrinsic value"? Buffett is defined as: "It is a business in the remaining life can be under the discounted value of the cash generated." And "book value", the name suggests, is recorded in the company through the accounting method the value of the books. Buffett had through the university education as a form of investment analysis, to say what the intrinsic value. Education's "intrinsic value" (not including non-economic benefits) is stated as: "We must estimate the graduates in his entire life in the absence of such education gains estimates. This gives us an excess earnings value, Therefore, an appropriate interest rate must be discounted to their graduation day. This revenue is equal to the calculated intrinsic economic value of education. " How to calculate the "intrinsic value", is indeed every company and industry analysts, a required course. When the analysis concludes that the intrinsic value is much higher than market value, they recommended buying; the other hand, has sold. If you read a different analyst on the report of the same company, the "intrinsic value" of the estimated sub-vary widely. Because it depends on each person on the future interest rate changes and cash flow estimates, and this difference is sometimes significant, but worse, the problem may be "the company the remaining life expectancy." Estimation of the value of intrinsic value and correction value of such a frequent and sharp fluctuations in market prices is inevitable. Therefore, the "intrinsic value" of the estimates of the top half of most of science is art, it needs other external investigation and intuition. However, bearing in mind the "intrinsic value" in particular with "book value", "market value" are different from investor behavior is meaningful. I'm here to give Graham a use of "intrinsic value" and "book value" of money story. 1911, the U.S. Supreme Court ordered the dissolution of the monopolistic nature of the standard pipeline company. This has a huge consortium of 31 companies, 8 companies come to the fore. At that time they are very small oil pipeline operator, responsible for transport of crude oil from various oil fields to the refinery. But no one has to understand the financial situation of these enterprises. Publication of their one-line-word "income account", recorded a net profit of the year, as well as a most brief balance sheet. On one occasion, Graham browsing a Interstate Commerce Commission (ICC) annual report, would like to get some detailed information on the railway companies. In this report, the end, he found some statistical data on pipeline companies. These data indicate on the form, "from the company reported to the ICC's annual report." Graham quickly got on a train bound for Washington, arriving ICC, into the archives to see if this eight pipeline companies in 1925's annual report. So that Graham is surprising is that, all of these companies have the best huge railway bonds. Only a few companies in which the value of these bonds more than the full market value of its shares. And he also found that the pipeline company's total business small, but high profit margin. Companies do not need to invest in these bonds. As a result, Graham in the market in the North pipeline companies have a total 4 million shares of 2000 shares, so that he has joined the Rockefeller Foundation's second largest shareholder, while the Rockwell Foundation, approximately shares of the company's 23%. Then, Graham walked into the company headquarters office, to make recommendations to management. Companies engaged in financial needs has nothing to do with their bond investment is unreasonable. Clearly, the interests of the shareholders for splitting the assets. However, management believes that they know better than the oil industry, Graham, Graham, if they do not like it, you can sell their shares. This is indeed the then rules of the game on Wall Street. However, Graham wanted to do a return to Don Quixote. Early in January 1927, he participated in the northern oil pipeline company's shareholder meeting. That the participants included five staff and Graham. Magically, the company's annual report was not ready, there, through its agenda. Outcome can be imagined. But Graham was not depressed, but ready for the next year's operational plan. One hand, he bought more of the company's stock, on the one hand the use of the then unknown situation: Northern pipeline company is incorporated in Pennsylvania have passed laws that require companies elect directors through cumulative voting system. In this way, through all the proxy votes all of the above plus invested in one of the directors, even if only a minority of people support the shareholders can ensure their own election. In accordance with the northern pipeline 5 directors of the company's small board size, as long as 1 / 6 of the stock power of attorney could have been elected a director, as long as 1 / 3 power of attorney could have been elected two. Graham personally to more than 100 shares of a shareholder lobbying, the right of ultimate control of the agency more than 1.5 million shares. In January 1928 the company's shareholders meeting, Graham and three lawyers finally yield management, shareholders of the "market value" of more than 110 U.S. dollars. The reason I specifically will come from, "Graham autobiography," written in the story out first is because in the previous article had mentioned the matter, as a memento "shareholders movement" old-timers bar. The second reason is that it may be prompted Buffett's another way to achieve the company's intrinsic value. I remember that earlier, "Business Week" had an article on Buffett's holding company reported all walks of life, giving the impression that he is an industrialist half of half a financier. True. Although Buffett is holding, or 100% to buy a business and buying shares in the market, there is no difference, but by controlling the company and management, he has maintained his own initiative, do not have to be as hard as Graham and passive. Buffett in Berkshire Hathaway's annual report, detailing over their acquisition strategy. First, the object is large companies, at least 10 million U.S. dollars in after-tax profits; Second, a proven sustained profitability; third, a small amount of debt or no debt, the company's net capital gains in good condition; fourth, properly managed; fifth, the business simple; sixth, clear price. At the same time, he would not engage in hostile takeovers, and tend to acquire cash. In addition, Buffett has also taken the trouble to explain these standards. For example, he stressed that his article on the "predict" the future are not interested in "reverse" situation is not interested. In particular, we should pay attention to the latter. Buffett seems to "turn around" a kind of quagmire similar to the U.S. after the Vietnam War veterans caught in anxiety. Buffett certainly has had its own "Vietnam." Buffett partnership in 1965 bought control of Berkshire Hathaway right, and its book net asset value of only 22 million U.S. dollars, and invested in a textile mill at all. In 1967, Buffett also used cash generated by the textile business of the state compensation, the company entered the insurance industry. Subsequently, the Berkshire Hathaway's business are increasingly diverse textile mills throughout the company to gradually reduce the proportion. Although to 1978, the mill has become a "tasteless", Buffett is still reluctant to part: "One of our textile mills located in their communities is very important to employers; 2, managers in reporting the issue was straightforward, in the solve the problem, spirited; 3, in the face of our universal problem, a partnership between employers and employees a smooth, cordial relationship. relative to the investment, textile mills should be able to generate adequate cash. provided that they meet these conditions - we hope so - despite the more attractive to invest in the funds, we will continue to support our textiles business. " Mills was also a slight profit in 1979, but since then it has been the consumption of large amounts of cash. By July 1985, Buffett has finally decided to close the plant - since 1980, the United States has 250 textile mills have closed their doors. Buffett this down the two conclusions. First, he has ignored the French philosopher Kamm's "emotional intelligence is the servant, rather than emotional slaves" advice, but believe that he would prefer to believe the source. Second, "one can count to 10 horses is an outstanding horse - but not an outstanding mathematician." Similarly, one can be rich in the efficiency of the Bank's textile industry is an outstanding textile company - but not an outstanding company. But by this time Buffett on the largest holding large companies such as Coca-Cola and Gillette has an unparalleled self-confidence. He is based on the brilliant performance of these companies in the past. In the 1996 Berkshire Hathaway annual report, Buffett said he is studying 100 years ago, Coca-Cola Company Annual Report (1896), but when Coca-Cola has just come out about 10 years. The then president, Candler said: "About this year, beginning March 1 ... 10 ... We hired a systematic contact with the Office of the Traveling Salesman, so that we cover nearly the whole of America's territory." Although the year Coca-Cola's sales was 148 thousand U.S. dollars, while the 1996 has reached about 32 billion U.S. dollars, but Buffett's leadership ambitions at that time and effort is still amazed. Moreover, Buffett continues to believe that the two companies over the past 10 years, a huge market share will continue to increase, "All signs indicate that the next 10 years they will achieve better results." Buffett's not that worried about the "great company's management personnel" to be wrong, especially when they lose the company's basic objectives. "Time and again, we are led to management's attention from the right way to leave the arrogance or the silly idea, we see the value of losing its vitality." He knows that a few decades ago Coca-Cola has had to cultivate shrimp, while Gillette has drilled oil. "But it will no longer appear in the Coca-Cola and Gillette - from their current and future managers of view, can be sure of it." Buffett has repeatedly reiterated that can not be alone in the past look to the future, otherwise, are the richest of the librarians. Nevertheless, he made a mistake. Three years later, that is, May 1, 1999 to March 2000, Coca-Cola and Gillette in the U.S. stock market, a loss of five forefront: the former loss-making among the first, which is ranked fifth. Simply the market value of the two companies losses attributed to the "traditional economy" losing ground, not be appropriate. Coca-Cola, for example, in almost 20 years maintained a 7% annual rate of return, after the company's global sales in 1999 grew by only 1%, while its operating profit plunged 20 percent, only 3.98 billion U.S. dollars. Obviously, though Coca-Cola in the past 20 years, globalization effort was successful, but the emerging markets, after all, there is a period of relative saturation. And, like Coca-Cola soda such as bottled water market, increasingly, natural fruit juice and other non-soda drink of water impact, the company has not made timely adjustments. Buffett has said that a story: his friends in to see him in a major investment mistakes, if you ask Warren Buffett: "Although you are very rich, why do you be so stupid?" Buffett is sometimes stupid, but more stupid they can be interpreted as Taizhiruoyu